Today the Royal Decree-Law 16/2020, of April 28, has been published in the BOE on procedural and organizational measures to deal with COVID-19 in the sphere of Administration of Justice.
These measures include those related to bankruptcy, which are aimed at preventing those companies that could be viable in general market conditions from being forced to close.
To foster the continuity and viability of the companies, the Government has extended the deadline to file for bankruptcy, thus allowing companies to have more time to obtain liquidity, offset losses and restructure their debt.
In this way, and without government restrictions or pre-conditions, companies that are insolvent are not required to file for bankruptcy until December 31, 2020. Consequently, the debtor company is protected until that date against requests for bankruptcy proceedings urged by their creditors.
Regarding companies that were involved in a bankruptcy proceeding during the declaration of the state of alert are also helped, allowing them to modify the approved collective agreement. To this end, they have one year from the declaration of the state of alert to present a proposal to modify the collective agreement.
In the cases in which the insolvent company cannot comply with the payments agreed in the collective agreement or with the obligations acquired after its approval, the duty to file for the liquidation of the company is postponed for one year from the declaration of the state of alert, as long as the debtor presents a proposal to modify the agreement.
On the other hand, and with the aim of enhancing cashflow, in bankruptcy proceedings that are declared within the two years following the declaration of the state of alert, the previously subordinated credits derived from loans, credits or other businesses of a similar nature will be classified as ordinary credits that since the declaration of the state of alert would have been granted to the debtor by persons specially related to him, that is, by shareholders , administrators and companies in the same corporate group.
Finally, we highlight the measures established by the Government to streamline the bankruptcy process. Among these are the preferential processing of bankruptcy in labour matters, the sales of productive units, the proposed collective agreements and their modification, the actions needed to reintegrate the assets, the homologation of refinancing agreements and the adoption of precautionary measures.
From the Insolvency Department of Martí & Associats we are ready to advise you and find legal mechanisms to face the economic crisis resulting from the COVID-19 crisis.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.